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Feature : High Currency

One of the first things you learn as a false-claims attorney is patience. Not the I'll-remain-calm-in-thetraffic- jam kind of patience. This kind of patience requires you to slowly build a case against a corporation that systematically cheated the federal government; wait years for the Department of Justice to hop aboard the train you set in motion; patiently sweat out a settlement; and then haggle with the DOJ over your client's share of that settlement. You're probably looking at a decade of intense work and equally intense waiting. And that's if you're fortunate enough to win your case.

If you're a potential false-claims whistleblower, there are few attorneys who could provide more entertaining company while you're stewing in your righteous juices than Glenn Grossenbacher, a San Antonio specialist in an area of false-claims law known as qui tam - Latin for "to sue on behalf of the king as well as yourself."

Although the False Claims Act dates back to the Civil War (when Abraham Lincoln pushed Congress to combat companies who defrauded the military), it didn't develop teeth until 1986, when Congress amended the law to allow whistleblowers to remain as a "party to the action" even if the government joins the lawsuit and assumes primary responsibility for the case. Congress also increased the range of whistleblower rewards from 15-25 percent to 25-30 percent of the recovery, and increased penalties on defendants.

Grossenbacher, 52, moved into falseclaims law in 1992, when it was still in its modern infancy. He has subsequently handled two of the eight biggest settlements in the history of qui-tam law (netting more than $600 million), and earned a reputation as one of the finest false-claims attorneys in the country.

Glenn Grossenbacher: one of the nation's finest qui-tam attorneys, and a rock-'n'-roll guitarist to boot.

"If I had a false claim to report, Glenn would be on the short list of lawyers I would want to go to," says Patrick Burns, spokesman for Taxpayers Against Fraud, a nonprofit, public-interest organization dedicated to fighting fraud against the federal government.

In 1993, Grossenbacher filed a suit against SmithKline Beacham, alleging that the clinical laboratories billed the federal government for unnecessary lab tests. The company eventually settled for $325 million. Five years later, he sued on behalf of James DeVage, a feisty, retired military veteran and IRS examiner, who discovered a pattern of excessive Medicare billing by HealthSouth, the nation's largest operator of rehabilitation hospitals. In December 2004, after nearly a decade of false starts and mixed messages, HealthSouth settled with the federal government for $325 million, and DeVage began receiving the first payments of his $8.1 million reward.

Burns compares Grossenbacher and his frequent legal collaborator John Clark to Butch Cassidy and the Sundance Kid, and there's definitely something of the charismatic gunslinger to Grossenbacher. He has long, white hair and a casual, informal air that suggests an ability to see the joke in every setback. He plays guitar and will soon attend a Rock 'n' Roll Fantasy Camp in New York, and he's also been a mainstay of the Men's Senior Baseball League. While his knowledge of qui-tam law is encyclopedic, you get the feeling that if you sat next to him at a bar, he could easily carry on a two-hour conversation without ever mentioning that he's an attorney.

"Glenn is fun, and I know that sounds like a small point," Burns says. "But it's actually a huge point in a False Claims Act case. If you're a whistleblower, you're going to spend more time with the attorney than you will with your spouse. So it does help if they're fun, if they have a sense of humor, if they're competent, if they can assemble a case, if they're dogged. And all of those things describe Glenn."

Undoubtedly, pitbull doggedness is crucial in false-claims cases, where you not only have to untangle highly sophisticated acts of corporate deceit and endure the long, slow grind of the legal process, you must often overcome apathy - if not outright hostility - from a federal government whose rightful funds you're trying to recover. The government chooses not to intervene in 80 percent of qui-tam cases, and 93 percent of the cases they decline are ultimately dismissed. Little wonder that there are less than 300 attorneys practicing qui-tam law in the United States.

"It's an uncommon arena, but False Claims Act attorneys like Glenn make more money for the federal government than the Denver Mint," says Burns, estimating that false-claims recoveries in the United States have exceeded $18 billion since 1986.

Qui-tam lawyers operate on a high-risk, high-reward playing field, and they're an uncommonly tight-knit group. Grossenbacher says that they've even formed a kind of secret society, and they proudly display their society pins when they meet with senators and representatives on Capitol Hill.

Grossenbacher's relaxed demeanor, quick wit, and obvious comfort in his own skin belie a competitive ferocity that he's quick to acknowledge. He says he possesses an obsessive-compulsive personality, and Burns says, "He may look laid-back, but there's a panther in there."

"The mindset you have to get is 'I'm taking this case to trial,'" Grossenbacher says. "If you do that, you never will go to trial. If you do it like 'I'm going to bullshit these guys and hope they roll over and give me some money,' you're going to get a small settlement or you're going to get forced into a trial and get your ass kicked."

“We literally had a case where the defense attorneys could talk to the Pentagon people easier than our attorney could talk to his own government people.”

- Glenn Grossenbacher

When Grossenbacher talks about the federal government's approach to false-claims cases, he inevitably goes back to Dwight Eisenhower's famous 1961 presidential farewell address. In that speech, Eisenhower, a lifelong military man, warned the nation about the dangers of the "militaryindustrial complex," an insidious political force that combined corporate interests and the war-making powers of the government in unprecedented ways.

Grossenbacher has seen that complex in action. "We literally had a case where the defense attorneys could talk to the Pentagon people easier than our attorney could talk to his own government people," he says. "They had better access. Of course, they were one of the biggest government contractors over the last several years."

The Department of Justice only hitches its clout to approximately 100 false-claims cases a year, and while some cases are rejected due to the government's limited resources or the difficulty of proving a pattern of fraud, Grossenbacher argues that bureaucratic corruption and/or laziness also play a part.

"It's quite shocking, but a lot of times the government just doesn't care," he says. "Let's say you're an inspector for the Defense Contracting Management Agency. Their mission is to oversee government contracts and make sure the government is getting what they paid for.

"Well, what if they're out there grab-assing around at the Air Force bases with the big companies? They're sitting on their butt, they're not doing any inspections, and all of a sudden, somebody says there's a problem. Well, something happened on their watch, and now they're part of the cover-up. That happens more frequently than you think."

Last month, Grossenbacher attempted an experiment. He'd received information about a false health-care claim, and although he decided the case was too small for him to pursue, he wanted to inform the government. So, for the first time, he called Medicare's fraud hotline to pass on the tip. The person he spoke to, a government employee paid to handle fraud reports over the phone, showed no interest and attempted to hustle Grossenbacher off the phone as quickly as possible.

When Congress enacted the False Claims Act in 1863, it was intended to punish military contractors who put sawdust in their gunpowder or found some other way to bilk the government. At that point, if a whisteblower - known as a relator in qui-tam cases - reported a company committing fraud against the government, they were entitled to a 50-percent reward.

By the early 1940s, the law became problematic because so-called legal parasites began obtaining indictments from criminal suits, copying them, and filing them as civil actions to obtain rewards. Congress changed the law in 1943 by including a provision that if the government had knowledge of the fraud, the whistleblower would not receive a recovery.

Forty years later, the pendulum had swung in the opposite direction. With lawmakers growing concerned that fraud was going unchecked, a bipartisan Congressional effort pushed through a series of amendments to the False Claims Act in 1986. "They tried to work a balance," Grossenbacher says, "where people would come forward with information and have some protections, but on the other hand they still wanted to discourage copycat and parasitic suits."

Grossenbacher, a Churchill High School graduate, attended University of Houston Law School, but spent much of his time there questioning his career choice. While in law school, he also took undergraduate pre-med classes and worked at a hospital in his spare time. "I didn't like law school, and thought I'd go to med school," he says. "Then I got out of law school, and thought, 'I don't want to go to school anymore.'"

Grossenbacher set up his own firm in 1986, and worked transaction and litigation cases for several years. He says his obsessive tendencies compelled him to fret about every last punctuation mark, and the heavy workload left him with little time for a personal life. That changed in 1992 when Grossenbacher received a visit from one of his stepfather's friends.

Grossenbacher's stepfather is a radiologist, and his friend had been involved in a business that recruited physicians for government facilities. He told Grossenbacher about a mom-and-pop company that seemingly had a lock on radiology contracts. There were questions abut whether their doctors were board-certified, and whether they qualified for a disadvantaged-business status they had been granted.

"We worked our butts off and I had all the books on what's board-eligible and what's board-certified," Grossenbacher says. "We thought that was our big claim. But `the government` ended up intervening on the disadvantaged- business claim. They said it was too hard to show what board-eligible is, because they'd misapplied it and hadn't evenly regulated different companies. So we learned right at the beginning, it was their screw-up and they weren't going to do anything about it."

It's a lesson painfully familiar to most quitam attorneys. They even have a term for it: The "stupid letter." That's what the government writes a qui-tam attorney to declare that they won't act on a fraud case because a rule has been applied different ways in different jurisdictions, rendering it too ambiguous for legal action.

A qui-tam case can proceed without the government's participation, but few attorneys make the attempt. For one thing, the rules of federal court require that an entire fraud case be laid out in a complaint, and without the possibility that the federal government will later bolster the case with an amended complaint, qui-tam lawyers face serious limitations. More importantly, they find themselves in the difficult position of proving that a government agency was defrauded when that agency has refused to support their legal action.

While the qui-tam attorney actively courts participation from the government, that participation can be thorny. "If they get stuck, they're going to come to you for help, but then they're going to want you to sign an agreement that you won't use the information to amend your complaint or do anything, so they can try to cut you out of the reward," Grossenbacher says.

"So there's two suits: First, where you're all pushing the rock up the hill together, and then the end part. At that point, the government and the defendant kind of become buddies. They've worked out their settlement, they're now friends, they're going to pay the government a bunch of money. The defense says to the government, 'Help us get rid of these assholes over here.'"

Grossenbacher went through an elaborate shell game in the late 1990s when SmithKline Beacham agreed to pay $325 million to settle three whistleblower suits. After the settlement, Justice Department attorneys contended that all the information provided by the whistleblowers was already public, so they didn't deserve a reward. Senior U.S. District Judge Donald W. VanArtsdale, however, awarded $42 million to the whistleblowers, including Grossenbacher's client, Charles Robinson Jr.

Grossenbacher says Robinson ultimately emerged with a "nice settlement," but only after Supreme Court Justice Samuel Alito Jr., then a U.S. Court of Appeals judge for the Third Circuit, overturned the whistleblowers' rewards. "So you can imagine how I feel about him," Grossenbacher says with a laugh.

James DeVage's "pride and joy" rests on a bookcase in the living room of his Elm Creek home. It's a bronze statue of David slaying Goliath and DeVage received it last year as the Taxpayers Against Fraud's "Whistleblower of the Year."

False-claims whistleblowers generally follow a predictable pattern: They work in one department of a company and see records that they assume are routine. When someone goes on vacation, the employee is pressed into double duty, sees another set of records, and detects irregularities. They attempt to help their bosses by reporting the problem, and they're swiftly rewarded with a pink slip.

DeVage did not fit that whistleblower profile. He was not a disgruntled HealthSouth employee, he was a patient who'd gone to HealthSouth for help with chronic back problems that had plagued him since the 1960s.

DeVage will celebrate his 85th birthday this month, but except for the two hearing aids he wears, he gives little indication of his age. A Pennsylvania native who served in Africa and Sicily during World War II, a few miles from the battlefront during the Korean Conflict, and as an adviser stationed near Saigon in the early days of the Vietnam War, DeVage is a born fighter with a strict code of ethics formed during the Great Depression.

Between his three decades in the military and 17 years working for the IRS, he'd served his government for nearly 50 years. He had no tolerance for fraud, and, as a former IRS investigator, he was highly skilled at detecting it.

DeVage says that he began to notice irregularities with his HealthSouth bills after his third treatment with the rehabilitation center. While his visits to HealthSouth resembled workouts at a gym, with DeVage left to his own devices, HealthSouth was billing Medicare for individual, specialized therapy.

"When I got the first bill from Medicare, and then from my insurance company, it was more than $2,000," DeVage says. "After I got that, I said, 'Jesus Christ, I could do this for $30 a month. What's the charge here? Then I found out that the charges for the gym and aquatics were excessive. None of it should have been authorized."

Between his Medicare coverage and supplemental insurance with the Government Employees Health Association, DeVage didn't spend a penny of his own money for the HealthSouth treatments. But he was infuriated to find that the health-care company willfully bilked the Medicare system out of taxpayer revenue.

"I noticed as an IRS agent, we have a culture that wants to beat the government," DeVage says. "There is no compliance. When I questioned HealthSouth on this thing, they said, 'That's the way we do business.' Nobody wants to do anything. I thought it was about time that somebody does something."

Grossenbacher and his collaborating attorneys, John Clark and Richard Tinsman, felt so strongly about DeVage's case that they decided to pursue the lawsuit even if the Department of Justice ultimately declined to join the effort. In fact, government officials twice sent Grossenbacher notice that they weren't going to intervene, but as they received additional information, they slowly changed their minds.

After his recovery payments began arriving in 2005, DeVage and Grossenbacher made a habit of toasting the next quarterly payment by getting together to knock back a few glasses of Scotch. But DeVage says the money itself means little to him, and bemoans the fact that it's made him a target for junk-mail solicitors.

"He just wanted to stop these guys," Grossenbacher says. "He was always offended at the word 'whistleblower.' To him, he was just being a patriot, a good citizen. He was different, because `the government` usually looks for a corporate insider, and he was a patient. But it shows what one patient can do if people are aware and pay attention."